MENA-2 SUNDAY MORNING ROUND-UP

Egypt
World Bank grants Egypt USD880 million loan for power plant Groups quit Tahrir rally, claim hijacked by Islamists Mubarak trial to be held in Cairo Six dead, 21 injured in Sinai clash Egypt sells EGP6 billion in T-bills, as planned TE selects PricewaterhouseCoopers for salary restructuring plan Suez Cement works forced into early retirement protest; no impact on operations

Saudi Arabia
Emaar Economic City cancels SAR325 million contract with Al-Redwan Company

Jordan
Arab Bank 1H2011 net profit up 13% Y-o-Y JOPH 2Q2011 net income jumps 71% Q-o-Q

Lebanon
Byblos Bank 1H2011 net profit rises 16% Y-o-Y

Morocco
King urges prompt elections to speed up reforms

Qatar
Qtel agrees to look into complaints of consumer rights movement

Oman
Nawras expects capex to fall to 15% of revenue in 2012

EFG Hermes Research

Al-Babtain Power and Telecommunication (Al-Babtain) - 2Q2011 Earnings Drop Y-o-Y on Squeezed Margins; Downgrade FV and Forecasts, Reiterate Buy - Company Note 28 July 2011 Arabian Pipes Company (APCO) - 2Q2011 Earnings Drop Y-o-Y; Expect Stronger Earnings in 2H2011; Reiterate Neutral - Flash Note 28 July 2011 Sidi Kerir Petrochemicals (Sidpec) - 2Q2011 Results In Line; Possible Revision of Forecasts on New Income Tax Expense - Flash Note 28 July 2011 Mobinil - Negative News Flow and Developments Priced In, Reiterate Buy - Company Note 28 July 2011

Agenda
Egypt Mon 15 August Telecom Egypt (TE) 2Q2011 results (EAS) Saudi Arabia Sat 6 August >> Etihad Atheeb AGM and EGM

Egypt News
World Bank grants Egypt USD880 million loan for power plant

The World Bank has announced that it will provide a USD880 million loan to help finance the North Giza power plant as well as other maintenance and upkeep on the national grid. The project is a 1,500-MW combined cycle gas turbine (CCGT) power plant. Additionally, the World Bank has agreed to provide financing for the Saudi-Egyptian power grid. Bidding for the grid, whose purpose is to exchange electricity between the two nations during the countrys differing peak consumption times, is scheduled for September 2011. (Al Ahram) Groups quit Tahrir rally, claim hijacked by Islamists More than 30 political parties and movements withdrew from a rally on 29 July 2011 that was organised to send a united message to the ruling army about reform, claiming that the event was hijacked by Islamist groups. "Islamic law above the constitution," read banners in Cairo's Tahrir Square, which was packed with tens of thousands of people. Protesters who fear Islamists seek to dominate the rewriting of the constitution demanded that the signs be taken down. A joint statement by more than 30 groups said that Islamists and other groups had agreed on demands to make during the rally in order "to thwart attempts by the military council to divide the revolutionaries and distort their image." However, the groups said that "some Islamic currents" violated this agreement. Abdelrahman al Barr, a senior Muslim Brotherhood (MB) member, said of the decision by other groups to quit the rally, "Salafist slogans shouldn't be a cause for other political forces to withdraw. Everyone is free to say what they feel like." The MB is home to a broad range of views; some within the MB have agreed that Salafist actions were divisive. "There are certainly some Brotherhood members who are upset over the way Salafist groups have taken over the square," MB youth member, Amr Salah, said in Tahrir. (Reuters) Mubarak trial to be held in Cairo The trial of ousted Egyptian president Hosni Mubarak - for charges that include ordering the killing of protesters will be held at Cairo's PoliceAcademy on 3 August, the state news agency MENA said on 30 July. A source close to Mubarak said on 28 July that his lawyer would tell the court in Cairo that Mubarak, who has been in hospital in the Red Sea resort of Sharm el-Sheikh since April, was too sick to attend the session in person. Many Egyptians view Mubarak's illness as a ploy used by the ruling military council to avoid publicly humiliating their former commander-in-chief. Demonstrators camped in Tahrir Square yesterday said that they were skeptical that Mubarak would show up in Cairo. (Reuters) Six dead, 21 injured in Sinai clash Six people were killed in fighting between an armed group and security forces in the north of Egypt's Sinai region, security sources and the state news agency, MENA, reported yesterday. About 100 armed men rode through the town of el-Arish on 29 July in cars and on motorcycles, waving flags with Islamic slogans while firing into the air, Sinai security sources said. The armed men attacked a police station and engaged in a shootout with policemen and soldiers, the sources said. An army officer and three civilian bystanders were shot dead. A policeman and a Palestinian suspect were reported to have died later from injuries suffered during the violence. Witnesses said that the attackers, many of whom wore masks, did not seem to be from the area as they lost their way several times before reaching the police station. (Reuters) Egypt sells EGP6 billion in T-bills, as planned The Ministry of Finance said that the Central Bank of Egypt (CBE) sold on its behalf EGP6 billion (USD1.01 billion) in domestic treasury bills (T-bills) on 28 July, the same amount that it was offering. The CBE sold EGP2.5 billion of 182-day T-bills at an average yield of 12.424%, up from 12.385% during the previous weeks auction. The bank also sold EGP3.5 billion of 364-day T-bills at an average yield of 12.847%, down from 12.9% during the last issue on 12 July. (Reuters) TE selects PricewaterhouseCoopers for salary restructuring plan Telecom Egypt (TE) [ETEL.CA] announced that it has chosen PricewaterhouseCoopers (PWC) to put a system for job evaluations and salary restructuring within the company. PWC presented the best technical and financial bid amongst 11 local, regional and international firms. PWC should present its final recommendations within six months of the start of its mission, TEs CEO, Mohammed Abdel Rehim, said. (MIST) TE: EGP15.62, Rating: Buy, FV: EGP19.5, MCap: USD4,474 million, TELE EY / ETEL.CA Suez Cement works forced into early retirement protest; no impact on operations Workers of Suez Cement Group (SCG) [SUCE.CA] that were forced into early retirement protested in front of the Ministers Council in Cairo Yesterday, Al-Alam al-Youm reported, requesting bonuses for 39 months of work. We do not believe that this will impact the groups daily operations as the protests in February and March did, especially in light of the fact that the armed forces interfered and stopped the demonstrations. (Al-Alam al-Youm) SCG: EGP37.87, Rating: Sell, FV: EGP30, MCap: USD1,156 million, SUCE. EY / SUCE.CA

Saudi Arabia News

Emaar Economic City cancels SAR325 million contract with Al-Redwan Company Emaar Economic City (4220.SE) has decided to cancel the SAR325 million contract signed with Al-Redwan Company for the construction of 134 units in the Economic City of King Abdullah. Al Redwan Company has constructed some of the units planned for the project, and EmaarEconomic City has already paid SAR56.8 million for these works. The contract cancellation will not require Emaar Economic City to pay any additional amounts to Al-Redwan Company. (Tadawul)

Jordan News
Arab Bank 1H2011 net profit up 13% Y-o-Y Arab Bank (ARBK.JO), Jordans largest bank by assets in Jordan, has reported net profit of USD327 million for 1H2011, up 13% Y-o-Y. The banks deposits reached USD30.9 billion, while loans grew to USD21.8 billion. The banks loans-to-deposit ratio stood at 71% during 1H2011. Arab Bank maintained its capital adequacy ratio at 14.9 %, well above the required CAR of 12% by Jordans Central bank. According to the banks CEO, Nemeh Sabbagh, growth in 1H 2011 was driven by the core banking business and demonstrated the banks solid banking franchise. (Zawaya Dow Jones) JOPH 2Q2011 net income jumps 71% Q-o-Q The Jordan Phosphate Mines Company (JOPH.JO) has published 2Q2011 results showing a 71% Q-o-Q jump in net income to JOD42 million, 91% above 2Q2010 net income. Revenues during 2Q2011 increased 34% Q-o-Q and 63% Yo-Y to JOD217 million on the back of higher prices for both phosphate rock and DAP, its two main saleable products. EBITDA in 2Q2011 increased 73% Q-o-Q to JOD59 million, mainly due to operating leverage at the rock business, which allowed the increase in prices to reflect disproportionately on margins. EBITDA margins expanded to 27% in 2Q2011 from 21% in 1Q2011 and 15% in 2Q2010. The rock segments EBITDA margin increased to 29% from 17% in 1Q2011, while the fertiliser segments EBITDA margin almost constant Q-o-Q at 16%. (Company Financials, Rita Guindy)

Lebanon News
Byblos Bank 1H2011 net profit rises 16% Y-o-Y Byblos Bank, Lebanons third largest lender by assets, reported a net profit of USD83.97 million for 1H2011, a growth of 16% Y-o-Y. The banks total assets reached USD16.5 billion, up 8% Y-o-Y. Customer deposits rose by 5.9% Y-o-Y in 1H2011 to USD12.6 billion, while loans reached USD3.9 billion, up 4.1% Y-o-Y. Byblos Bank loans-to-deposit ratio reached 31% in 1H2011. (Zawaya Dow Jones) Byblos Bank: USD1.66, Rating: Neutral, FV: USD1.9, MCap: USD702 million, BYB LB / BYB.BY

Morocco News
King urges prompt elections to speed up reforms King Mohammed called on 30 July for prompt parliamentary polls to expedite a new constitution that effectively reduces his powers, following months of protests. In a television address to mark the 12th anniversary of his reign, the 47-year old monarch said that constitutional changes should be implemented according to a "rigorous schedule." "Any delay may jeopardise this dynamic of trust and squander opportunities offered by the new reform in development and providing conditions to ensure decent living standards," King Mohammed said in his first address since the 1 July referendum. The Interior Ministry held meetings with dozens of political parties in July to push for parliamentary polls in October of this year rather than in September 2012. The King acted swiftly following popular uprisings across the region in order to contain any spillover from the Arab Spring, promising constitutional changes on 9 March, two weeks after protests spread to Morocco. A new constitution was endorsed in a referendum on 1 July, but has failed to end peaceful protests by the youth-led February 20 movement, which is pushing for a constitutional monarchy in which the king remains purely as a figurehead. Its implementation hinges on the election of a new parliament and the appointment of a government to draft laws enshrining the new constitution. (Reuters)

Qatar News

Qtel agrees to look into complaints of consumer rights movement Qtel (QTEL.QA), Qatars incumbent telecom operator, has agreed to look into several complaints raised by a consumer rights movement. The movement has been advocating for its cause on Twitter through the hash tag #Qtelfail, The Peninsula reported. Satisfied with the outcome of the dialogue on 30 July with Qtel, the QtelFail movement leaders changed their Twitter account into a laudatory campaign, calling it QtelBravo. We are glad that Qtel officials were intelligent enough to answer our calls, one of the campaigners, Abdullah Al Athbah, told The Peninsula in an interview. He said that Qtel has positively addressed a number of the movements concerns, like that calling for improving the quality of the operators services. Adel Al Muttawa, Qtels Communications Director, said that Qtel had taken their complaints positively and mostly addressed their concerns. In an earlier response to an enquiry from The Peninsula, Qtel admitted that it was still confronting technical flaws regarding slow internet connections due to the increasing demand of broadband users. Qtel quickly assured customers that it was working very hard and had invested heavily this year to resolve the issue. The company, however, noted that ongoing works for upgrades and improvements on the system can cause service disruptions. Software changes and the roll-out of new base stations have all caused some issues in 2011, but these are necessary improvements that will position Qatar for future growth, and we thank our customers for their patience during this process, a Qtel statement read.(The Peninsula) Qtel: QAR156.7, Rating: Buy, FV: QAR174.5, MCap: USD7,577 million, QTEL QD / QTEL.QA

Oman News
Nawras expects capex to fall to 15% of revenue in 2012 Nawras (NWRS.OM), Omans second telecom operator, expects its capex to decrease to 15% of total revenue in 2012 after seeing pressured net profit in 2Q2011, Zawya Dow Jones quoted the companys CEO, Ross Cormack, as saying. Earnings in 2Q2011 fell 17% Q-o-Q to OMR10 million, impacted by higher depreciation from the fixed network. "For home broadband, we have already reached 81% of households, which is the majority of houses, so we don't expect to do significant extra building except for further capacity for peoples use. Expenditure is already done in that area," Cormack said. "In terms of the international cable, the most significant expenditure is already done," he added. Cormack stated that the company aims to increase revenue in 2H2011 through marketing initiatives and a cost-efficiency programme. (Zawya Dow Jones) Nawras: OMR0.671, MCap: USD1,132 million, NWRS OM / NWRS.OM

EFG Hermes Research

Al-Babtain Power and Telecommunication (Al-Babtain) - 2Q2011 Earnings Drop Y-o-Y on Squeezed Margins; Downgrade FV and Forecasts, Reiterate Buy - Company Note 28 July 2011 Reduce Fair Value by 9% to SAR33.3/Share; Reiterate Buy: We downgrade our fair value (FV) to SAR33.3/share from SAR36.6/share, implying 28% upside potential; we reiterate our Buy rating. The share price decreased 12% over the last two weeks, impacted by the drop in the Saudi market as whole, as well as weak results. We do not see any short-term triggers for the stock, unless the market reacts positively to the one-off reversal of minority income that should be reported in 2H2011. Our valuation is driven by a long-term gradual recovery in margins beyond 2011 on the back of a demand recovery; we thus recommend building long-term positions in Al-Babtain on price dips. The company enjoys a strong balance sheet and a well diversified client base and should benefit from the expected infrastructure spending in Saudi Arabia, as well as the growth in power projects, such as the GCC power grid. Forecast Changes: Lower Margins on Rising Competition: We lower our gross margin forecasts for 2011 and beyond on the back of rising competition. We lower our 2011 margin estimate by c100 bps to 15.1%, and we maintain our expectation of a margin recovery beyond 2011, but at a slower pace than previously expected. We expect 2H2011 earnings to be supported by the cSAR24 million one-off reversal of last years minority interest following the acquisition of a minority stake in Al-Babtain Leblanc Telecommunication Limited. The changes made to our forecasts lead to a 7% decrease in 2011 earnings to SAR92 million. Loss of Pricing Power Casts a Shadow on 2Q2011, Despite High Sales: Al-Babtains 2Q2011 net profit came in at SAR17.7 million, down 28% Y-o-Y and below our SAR21 million forecast. The drop in earnings was driven by a squeeze in margins, which came in at 14.2% versus 23% in 2Q2010 and 15.5% in 1Q2011, due to intensifying local and regional competition coupled with high commodity prices, which negatively impacted selling prices. Revenue increased by 11% in all segments thanks to higher sales volume. On the expense level, the SG&A-to-sales ratio

decreased to 7% in 2Q2011 versus 8.6% in 2Q2010, as the company implements a cost reduction plan by improving the efficiency of its machineries. (Tarek El-Shawarby) Arabian Pipes Company (APCO) - 2Q2011 Earnings Drop Y-o-Y; Expect Stronger Earnings in 2H2011; Reiterate Neutral - Flash Note 28 July 2011 2Q2011 Earnings Down 84% Y-o-Y on Lower Demand and Margins: Arabian Pipes Company (APCO) 2Q2011 net profit came in at SAR1.3 million versus a loss of SAR1 million in 1Q2011 and our SAR4.5 million forecast. The drop was driven by a 51% Y-o-Y decrease in revenue to SAR49 million on lower sales volumes on the back of lower demand during 1H2011, coupled with higher costs related to APCOs Al Jubail and Riyadh plants as the company has not begun implementing large contracts secured earlier this year. Gross profit dropped 67% Y-o-Y to SAR6.2 million, versus SAR3 million in 1Q2011, while the gross margin sunk to 12.6% from 19% in 2Q2011 and up from 5% in 1Q2011. Net operating profit came in at SAR0.958 million versus SAR6.1 million in 2Q2010 and a loss of SAR1.4 million in 1Q2011. Large Contracts Should Boost 2H2011 Earnings; Maintain Forecasts: We maintain our forecasts, which call for 2H2011 earnings of SAR17 million, on the back of high utilisation rates in the new plant, which will be driven by large contracts secured earlier this year, in our view. APCO won a SAR315 million contract to supply large diamtre oil pipes to the UAE earlier in 2011, the effect of which should be felt in 2H2011/early 2012. APCO was also awarded a three-year contract worth SAR500 million to supply 6-inch diametre oil pipes to the Omani state-owned Petroleum Development Oman (PDO) Company. Production is expected to start in 4Q2011 and final delivery will be in mid-2014. The financial effect on APCO will appear over the life of the contract (three years) and be based on products supplied in each stage. Maintain Fair Value of SAR31.9/Share; Reiterate Neutral: We maintain our fair value (FV) of SAR31.9/share, implying 0.5% upside potential to the current share price, and hence reiterate our Neutral recommendation. In our view, APCO is a highly speculative stock as news flow regarding contract awards determines the stocks performance. We believe that the current share price factors in the strong earnings recovery in the short- to medium term. We believe that contracts secured earlier this year reflect more signs of demand recovery. We would be more positive on the stock if we were to see APCO secure additional large, multi-year contracts. (Tarek El-Shawarby) Sidi Kerir Petrochemicals (Sidpec) - 2Q2011 Results In Line; Possible Revision of Forecasts on New Income Tax Expense - Flash Note 28 July 2011 2Q2011 Net Income In Line With Our Estimate: Sidi Kerir Petrochemicals Co. (Sidpec) announced 2Q2011 unaudited net income of EGP248 million, up 20% Y-o-Y and 11% Q-o-Q, and only 2% above our estimate of EGP243 million. We highlight that Sidpecs tax holiday ended in 2010 and that the company started paying taxes in 1Q2011. Earnings before tax reached EGP310 million, up 55% Y-o-Y and 11% Q-o-Q, and 2% above our estimate. Revenue came in at EGP635 million, up 37% Y-o-Y and 12% Q-o-Q, and close to our estimate of EGP628 million. Gross profit was EGP314 million versus our estimate of EGP311 million. No further details are available until the audited financial statements are published (expected next week). The improvement in results was mainly driven by an increase in selling prices, which rose c30% Y-o-Y and 10% Q-o-Q. Results Imply 20% Income Tax Rate In 2Q2011: The companys unaudited figures implied a 20% income tax rate. According to management, the company has not received any official statements from the government concerning the increase of the income tax rate to 25%. However, given that the Military Council has approved the governments proposed FY2011-2012 budget, we believe audited financial statements could show the 25% income tax rate, which was included in the budget. This would lead to a net profit of EGP442 million in 1H2011 versus an unaudited net profit of EGP471 million. Possible Revision Of Our Forecasts; Maintain Neutral Rating: Our current fair value (FV) of EGP16/share offers 15% upside potential; however, we reiterate our Neutral rating, as our sensitivity analysis shows that a 25% income tax rate would reduce our 2011 net income estimate by 4% and our fair value by 6%. We therefore continue to believe that Sidpecs strong fundamentals and attractive dividend yield are well-balanced with downside risks, including the increase in income tax and the risk of higher gas prices in Egypt (currently at USD3.00/mbtu). (Malak Youssef, Ahmed Shams El Din) Mobinil - Negative News Flow and Developments Priced In, Reiterate Buy - Company Note 28 July 2011 Cut FV 19% on Lower Forecasts and Higher Corporate Tax Rate: We reduce our fair value (FV) for Mobinil by 19% to EGP138.9/share on lower forecasts (post-a weak 1H2011) and the new 25% corporate tax rate starting in FY2011. We also lower our subscriber forecasts after 2011, given increased local competition.

2Q2011 Bottom Line in Negative Territory, Hit by New Tax Regime: Mobinil reported a consolidated net loss for 2Q2011 of EGP108 million, versus our net profit estimate of EGP173 million and Bloomberg consensus of EGP240 million. The net loss was impacted by a one-off accounting treatment related to the new tax regime, as Mobinil had to account for a 25% increase in its deferred tax liability account, which has hit the income statement through a non-cash tax expense of cEGP170 million. Revenue and EBITDA came mostly in line with our conservative estimates. Change in Mobile Market Dynamics: We estimate Mobinils current market share at 35.7%, VFE at 39.5% and Etisalat Misr at 24.8%. With a greater focus on subscriber retention and on enhancing usage from its existing subscriber base, we believe that Mobinil had to resort to this retention strategy given the strong competitive pressure from both Etisalat and VFE who appear to be consolidating their efforts. We see Mobinils market share in 2014 at 33.3%, VFE at 39.8%, and Etisalat Misr at 26.9%. No Short-Term Catalyst, Buy on Long-Term Fundamentals: In spite of the 33% upside potential that our FV of EGP138.9/share offers over the current market price, we do not believe that the share price will perform positively in the short term given the lack of short-term catalysts and the increase in negative news flow, which has been impacting the share price (down 36% since 1 June 2011). While we believe that all negative news flow is already priced in, we do not rule out further pressure on the share price in case of additional bad news and increased, aggressive competition. We therefore remain cautious on the stock in the short-term. While valuation multiples do not currently look compelling, our Buy rating is supported by the companys FCF as we expect the 2012 dividend to be more attractive, with an estimated yield of 10%. And OTs approaching put option date (September 2012), whereby Sawiris can sell his stake to France Telecom (FT) at EGP221.7/share. (Marise Ananian)
[Note EFG Hermes is not responsible for the accuracy of news items taken from other media.] __________________________________________________________________________________________________________ _______ Our investment recommendations take into account both risk and expected return. We base our fair value estimate on a fundamental analysis of the companys future prospects, after having taken perceived risk into consideration. We have conducted extensive research to arrive at our investment recommendations and fair value estimates for the company or companies mentioned in this report. Although the information in this report has been obtained from sources that EFG Hermes believes to be reliable, we do not guarantee its accuracy, and such information may be condensed or incomplete. Readers should understand that financial projections, fair value estimates and statements regarding future prospects may not be realized. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice. This research report is prepared for general circulation and is intended for general information purposes only. It is not intended as an offer or solicitation with respect to the purchase or sale of any security. It is not tailored to the specific investment objectives, financial situation or needs of any specific person that may receive this report. We strongly advise potential investors to seek financial guidance when determining whether an investment is appropriate to their needs. No part of this document may be reproduced without the written permission of EFG Hermes.